TRUST Holdings Inc.

There is a risk that securing profitable parking lot sites will become difficult due to an increase in landowners' willingness to sell amid soaring land prices and the expansion of land-use options. A rise in rental fees could also affect business performance and financial condition. The Group primarily secures sites through lease agreements with landowners, and responding to changes in market conditions remains a challenge.

Parking lot sites operated under the direct-management format are secured through lease agreements with landowners, generally for one-year terms, and the contract terms allow termination through written notice three months in advance without the other party's consent. There is a risk of sudden termination occurring irrespective of the Group's intentions, and if terminations of highly profitable parking lots occur frequently, this could materially affect business performance and financial condition.

The real estate business is highly susceptible to economic conditions, interest rate trends, housing tax systems, and other factors. Should an economic downturn, significant interest rate increases, or tax system changes occur, this could lead to reduced customer purchasing intent and lower sales prices. In addition, increases in land acquisition costs and construction costs, or price declines due to oversupply, may also affect business performance and financial condition.

Most of the funds for land acquisition and construction in the fractional parking lot business and real estate business are financed through borrowings. At the end of the current consolidated fiscal year, the consolidated balance of interest-bearing debt stood at ¥5,418 million (¥5,171 million in the previous fiscal year), with the interest-bearing debt dependency ratio at 62.1% (58.5% in the previous fiscal year), both at high levels. Should interest rate levels rise in the future, the burden of interest payments would increase, potentially affecting business performance and financial condition.

The Group is subject to a wide range of laws and regulations, including the Parking Lot Act, the Building Lots and Buildings Transaction Business Act, the Act on Specified Joint Real Estate Ventures, the Financial Instruments and Exchange Act, and the Money Lending Business Act. There is a risk that legal amendments or the introduction of new regulations could give rise to new obligations or cost burdens. In particular, if a consolidated subsidiary is subject to a business suspension order or license revocation under Articles 65 and 66 of the Building Lots and Buildings Transaction Business Act, this could materially affect the continuity of operations.

The Group holds personal information such as customer information and membership information across its parking, real estate, fractional parking lot, water, and spa businesses, among others. If such information were leaked, it could damage the Group's reputation and affect business performance. Although the Group has obtained the Privacy Mark certification and implemented centralized management and enhanced security measures within its core business systems based on its "Basic Regulations for Personal Information Protection," risk from unforeseen incidents remains.

There is a possibility that the book value of held fixed assets may need to be written down to the recoverable amount due to deterioration in real estate market conditions or worsening profitability. Recognition of impairment losses is a risk that directly affects business performance and financial condition, and trends in the real estate market serve as an important management indicator.

Of the 30,171 managed parking spaces, 8,050 spaces (26.7%) are staffed parking lots, indicating a high dependence on human capital. Securing personnel is also essential in the spa business and security business. If the Group is unable to secure sufficient personnel with the desired skills, or if existing employees leave, this could significantly affect business performance and future business development. While the Group is pursuing planned and proactive recruitment activities, intensifying competition in the labor market remains a challenge.

The Group records an allowance for doubtful accounts against operating loans in the medical services business. However, should borrowers experience business deterioration due to the spread of new infectious diseases or other factors, requests for principal repayment grace periods or interest rate reductions may necessitate a substantial increase in the allowance. Additional provisioning for the allowance is recognized as a risk that could affect business performance and financial condition.

Due to the impact of the military conflict between Russia and Ukraine, there is a risk that raw material prices and gasoline prices could remain elevated amid soaring crude oil prices, which could affect business performance and financial condition. In addition, the occurrence of natural disasters and man-made incidents such as earthquakes, wind and flood damage, fires, and terrorism raises concerns about impacts on business performance and financial condition.